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An Introduction to Procurement Management

Jan. 14, 2010
Brian Egan

Project procurement activities are often managed by specialists.  By this I mean that the procurement department takes over responsibility for purchasing and contract management from the project manager.  As a result of this separation of responsibilities, the steps and stages of procurement are often poorly understood by PMs.

In this and the next few blog submissions, I will attempt to shed light on procurement activities and relate these activities to A Guide to the Project Management Body of Knowledge—Fifth Edition (PMBOK® Guide).

Procurement Steps

1. Make purchase decisions - Planning
Purchase decisions follow from project planning and analysis. Project needs are analyzed and compared with available resources and skills.  Anything the organization cannot provide must be procured.

2. Prepare bid documents
These documents include a SOW statement (Scope of Work), general terms and conditions, bid response instructions, and an explanation of how proposals will be evaluated (source selection criteria).

3. Distribute bid packages to potential vendors
Potential vendors can be identified through advertising, the internet, or through an organization’s qualified vendors list.

4. Bidder’s conferences
Bidder or vendor conferences are used to efficiently deliver detailed information to potential vendors.  The events offer an opportunity for vendors to ask questions and to hear questions posed by other potential vendors.

5. Receive responses from bidders
A suitable time-frame must be given for vendors to prepare bids.  Additional information and clarifications are often required by vendors.

6. Evaluate proposals
After all bids have been received, they are evaluated on the basis of a predetermined scoring system referred to as ‘source selection criteria.’  The comparisons are typically performed by experts from various disciplines related to the type of procurement.

7. Interview bidders
Short-listed bidders are interviewed to discuss details of their offers and to ensure a good fit with the purchasing organization.

8. Conduct negotiations
The leading candidate is invited to discuss (negotiate) contract details.  The issues that generally require clarification include such things as delivery date, shipping costs, warranty, and support.

To be continued...


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